Factors Influencing Bank Risk in Europe: Evidence from the Financial Crisis
North American Journal of Economics and Finance, 34 (2015), 138-166.
Posted: 1 Aug 2013 Last revised: 16 Sep 2015
Date Written: September 9, 2015
We use a dynamic panel data model to analyze bank-specific and macroeconomic determinants of bank risk for a large sample of commercial banks operating in the euro area. The selected time span, from 2001 to 2012, considers the impact of the on-going financial and economic crisis on the Eurozone banking system. Our results indicate that capitalization, profitability, efficiency and liquidity are inversely and significantly related to bank risk. However, the recourse to wholesale funding by banks seems to increase their risk. We also find that less-concentrated markets, lower interest rates, higher inflation rates and a context of economic crisis (with a falling GDP) increase bank risk.
Keywords: Bank risk; European banking system; Eurozone; Non-performing loans; Z-score
JEL Classification: G21, G32, L11
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